Telecom regulator Ofcom has fined BT £42m for abusing a clause in contracts with communication service providers (CSPs) that allows it to avoid fines for delaying the installation of Ethernet.
The fine follows an investigation of a complaint from communication service provider Vodafone that BT’s Openreach arm was opting out of paying service level fines when it failed to deliver Ethernet services to CSPs in a timely manner.
The investigation found that between January 2013 and December 2014, BT misused the “deemed consent” term in its contracts to reduce compensation payments owed to other telecoms providers that needed high-speed Ethernet lines installed on behalf of their business customers.
Gaucho Rasmussen, Ofcom’s investigations director, said: “These high-speed lines are a vital part of this country’s digital backbone. Millions of people rely on BT’s network for the phone and broadband services they use every day.
“We found BT broke our rules by failing to pay other telecoms companies proper compensation when these services were not provided on time. The size of our fine reflects how important these rules are to protect competition and, ultimately, consumers and businesses. Our message is clear – we will not tolerate this sort of behaviour.”
Deemed consent was introduced by BT to cover circumstances outside its reasonable control that cause a delay, and is intended to minimise the additional time that would otherwise be injected into the provisioning process by obtaining explicit consent.
Last January, Ofcom issued a final statement about its investigations, which concluded that BT’s connectivity service agreement (CSA) required BT to notify the communications provider as soon as reasonably practicable where it intends to deem consent. “Our provisional view was that BT would not have acted in accordance with this clause in cases where it deemed Vodafone’s consent, without notifying it of its intent to do so,” the regulator stated. “We noted that the parties appear to dispute whether or not notice had been given by BT in some circumstances.”
Read more about Openreach
- Frances Murphy, partner, and Joanna Christoforou, of counsel, from the London office of global law firm Morgan Lewis examine Ofcom’s review of BT’s Openreach.
- BT agrees to Ofcom’s requirements for the legal separation of its arm’s-length infrastructure division Openreach, which is now to become a distinct business.
TalkTalk, which also gave evidence during the investigation, noted that Openreach’s use of deemed consent to avoid service level fines had a discriminatory effect in favour of BT’s downstream operations. “If BT is required by Ofcom to make up the shortfall in service level guarantees (as an outcome of a dispute), this will never compensate its external customers in full because BT would not normally be required to pay interest to the amount equal to the cost of capital of the external customer,” said TalkTalk in evidence submitted to Ofcom’s investigation.
Vodafone said its analysis showed BT had engaged in sustained and systematic breaches of its contractual and regulatory requirements.
“Compliance with the SLAs for the delivery of BT’s Ethernet services is an important aspect of BT’s compliance with its obligation to provide its services on fair and reasonable terms and as soon as reasonably practicable,” Ofcom’s January 2016 final report stated. “A fundamental element of this is that BT should obtain the CP’s consent to any extensions of these timelines.”
Some industry watchers believe Openreach actively favours BT over external communications service providers. Writing in Computer Weekly last May, Frances Murphy, a partner at the London office of global law firm Morgan Lewis, said: “BT’s competitors claim Openreach has been favouring BT and discriminating against them in providing access to the pipes and telephone cables that connect most UK homes and businesses to the national broadband network.”
This could finally be changing. Earlier this month, BT agreed to Ofcom’s requirements for the legal separation of the Openreach infrastructure division.